Executives at the Solicitors Regulation Authority are likely to be summoned to explain their actions before and after the costly collapse of national firm Axiom Ince last year.
The Legal Services Board today confirmed the scope of its review into the Axiom affair as it fulfils its obligation to oversee regulation. The review aims to establish the ‘adequacy, efficiency and effectiveness’ of the SRA’s actions and what further actions it could have taken, as well as suggest changes to policies and procedures that could prevent something similar happening again.
In an email sent this week to SRA chief executive Paul Philip, LSB general counsel Danielle Viall said the review will require a copy of all documents relating to the SRA’s regulation of and intervention into Axiom Ince.
An introductory meeting will be held between the SRA and the LSB’s appointed solicitors, Northern Ireland firm Carson McDowell, followed by the request for documents. Viall states that SRA board members and/or members of the executive may be interviewed by lawyers.
The scope of the review includes looking at management oversight and supervision, the quality of decision-making and whether the SRA acted in a reasonable timeframe.
The review will consider the events leading up to the intervention and what steps had been taken. The LSB will examine the adequacy of the SRA’s supervision of Axiom Ince’s compliance and whether it discharged its regulatory functions as required. Policies in relation to so-called ‘accumulator firms’ which grow rapidly through acquisition will also come under the microscope.
Viall said the LSB still intends to publish the outcome of its review this spring. The organisation will make no further public comment until that point and asked the SRA to take the same position.
Axiom Ince was shut down in October with intervention agents appointed to handle the closure. The firm had grown overnight the previous April with the acquisition of the much larger Ince & Co. Three months later, the SRA sent investigators in to assess the firm, and two weeks after that three directors were suspended. Managing partner Pragnesh Modhwadia, one of those suspended, later admitted in court that client money had been spent on acquiring law firms and properties.
The Serious Fraud Office announced in November that it was conducting a criminal investigation into suspected fraud at Axiom Ince and that £66m was missing from the client account. Seven individuals were arrested and various sites searched.
The missing money is likely to be covered by solicitors through increased contributions to the compensation fund. The SRA has the statutory power to limit clients’ collective claims to £5m but has rejected calls from elements of the profession, notably the Joint V biggest regional law societies, to exercise this power.
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